RAMALLAH, September 18, 2012 (JMCC) - Last week, the Palestinian Authority experienced the most dangerous internal crises it has faced since its establishment in 1994. Although
the immediate cause of that crisis was the government’s announcement of
price hikes in fuel and a one percent increase in the value added tax,
it is difficult to understand what happened without acknowledging the
other less obvious factors that contributed, including the current
political environment.

The price hike was, at face value, an automatic consequence of rising international prices, particularly because the Palestinian economy imports nearly all its goods from other countries, mainly Israel. Other governments faced with rising prices were able to absorb the shock in different ways. Israel, for example, accompanied the increase in prices with a boost to the legal minimum wage. In Jordan, the government was able to absorb the rising costs by increasing its budget deficit, assuming that friendly oil-producing countries will sooner or later intervene with funds for their own political reasons.

The Palestinian Authority, on the other hand, was unable to do anything to absorb the rise in costs other than pass them on to consumers because the increase in international prices came on top of an accumulated budget crisis. The World Bank and the International Monetary Fund have been warning of the difficult financial challenges facing the Palestinian Authority and the Palestinian economy. Regional donors and the United States simply haven’t been fulfilling the pledges they made at donor conferences, pledges on which the Palestinian Authority relies deeply to cover costs. And because the political talks with Israel are frozen and Palestinians are thus unable to develop 60 percent of the West Bank and its resources (which remains under Israeli control according to the Oslo agreements) and are also hindered by Israeli export obstacles, the Palestinian government remains limited in the revenue it can obtain locally. Today, the government remains hundreds of millions in debt.

What transferred this prolonged budget crisis into an emerging existential catastrophe, however, were three additional factors. First, the Palestinian Authority has been unable to deliver on almost every other important aspect of Palestinian life, including the economy. It has been unable to move the peace process towards ending Israel’s occupation, as it promised. (In fact, recent years have seen an unprecedented expansion of settlements and other moves to entrench Israeli control.) It has failed to produce reconciliation between the factions Fateh and Hamas, despite repeated calls from the public to end the division between Gaza and the West Bank. And it has neglected to hold elections, introducing a crisis of legitimacy and questions about how it is deciding its policies.

Second, the Palestinian people feel humiliated. The way that Israel is treating them and their leaders is creating a sense of shame. The way the settlers are allowed to lord it over Palestinians and their land, wreaking havoc and violence; the manner in which the Palestinian Authority is prevented from delivering simple services; the military incursions into Palestinian towns and villages; the confiscation of land and demolition of homes and numerous others aspects of what has become the status quo all create resentment. The public feels that its leaders are being treated as puppets and that their own lives are without dignity.

Third, when Fateh, which dominates the Palestinian Authority, realized that a wave of public protests was on its way, it sought to divert public anger and protests away from the faction and its institutions and the Palestinian Authority at large. Instead, it targeted the cabinet and the prime minister. The first leaflet on the crisis was signed and distributed by the Fateh student bloc at Birzeit University. This leaflet blamed Salam Fayyad and his government for the financial crisis and called for his resignation, thus inciting the public against him. The content of that leaflet set the tone for the coming week of protests, including almost all of the slogans and arguments that were used.

Moreover, the prominence of Fateh activists in the demonstrations added to what was already a factional free-for-all. Leftist factions sought to use the protests to boost their chances in local council elections planned for October. Hamas, too, thought this might be a golden opportunity to topple the government or perhaps create a state of chaos and lawlessness that would damage the Palestinian Authority in the West Bank. The atmosphere was one of a tinderbox, and all that was missing was the match.

What prevented an explosion were the events of last Monday, September 10, which served as a wake-up call. Strikes turned violent and protesters took to the streets, attacking police stations and municipalities in Hebron and Nablus, the West Bank’s industrial centers, and Bethlehem to a lesser extent. Things were on the verge of spinning out of control. Quickly, elements within Fateh realized that they may not be able to contain the fire that they had set alight. Key figures acted quickly to contain the general discontent and the next day, the government announced a recall of the fuel price hikes and higher value added tax, resolving to make up the difference through internal austerity measures.

What needs to be said today is that all of the factors that led to this volatile situation remain in effect. Whether the spark is political or economic, another blow-up is just around the corner. President Abbas seems to know this and has demanded in two urgent meetings that the leadership either declare the agreements with Israel null and void, or call immediate presidential and legislative elections.

But his options are very limited. If the crushing nature of the Israeli occupation and the seeming indifference of the donor community persist, the next emergency could easily bring the Palestinian Authority to its end. Such a collapse will certainly transform the reigning atmosphere of calm into chaos and complete uncertainty, which will have widespread negative consequences for all.